MNI: RBA's Bullock Lays Out Further Reforms

Reserve Bank of Australia board members will attend “policy issues” sessions 10 days before each decision-making meeting, which will also increase in length and depth, Governor Michele Bullock said on Wednesday.

Speaking at an industry event in Sydney, Bullock noted the longer board meetings will allow RBA staff to deliver more involved presentations on the economy and markets. “This will mean that the Board spends around 3.5 hours discussing these issues – about twice as much as now,” she said, according to the text of prepared remarks. The Reserve will also provide board members with a wider range of briefing material, including a summary of views from RBA staff to capture a diversity of opinion.

“Currently, the Governor briefs the board at each meeting on the views of senior staff and highlights where there are differences of opinion," she added. "We intend to make this more structured and to draw on the full range of internal policy meetings, not just those of the most senior."

The Reserve will also release the updated Statement on Monetary Policy alongside every second meeting to provide a more comprehensive discussion of its reasoning and the outlook underpinning decisions, Bullock continued.

The changes follow the RBA Review recommendations earlier in the year and a first round of changes revealed by former Governor Philip Lowe in July. The government is expected to table legislation to parliament soon to implement reforms that require a change to the Reserve Bank Act 1959, while the treasurer plans to sign an updated Statement on the Conduct of Monetary Policy with the RBA Governor that sets out its mandate, likely trimming the Reserve’s target to employment and price stability.

INFLATION FIGHT

Bullock noted the final stretch of reducing inflation to target will take longer than the initial leg, which saw CPI fall to 5.5% from its 8% peak over just three quarters.

“But we expect it to take another two years for inflation to fall that much again and move below 3%,” she said. “This is because much of the remaining task of bringing inflation back to target will require bringing aggregate demand and aggregate supply into closer alignment.”

The RBA board decided to hike the cash rate 25bp to 4.35% earlier this month. Its November Statement on Monetary Policy embedded a more aggressive rates stance, MNI reported. (See MNI POLICY: RBA's Fresh Forecasts Embed Strong Rates Profile)